​As our collective shopping experience continues to migrate to a digital ecosystem - further supplanting visits to physical stores - buying behaviors are changing and evolving. Impulse buying – grabbing an unplanned item while on a planned shopping trip – is one of those behaviors. Most of us (80% according to Invesp) engage in some kind of spur-of-the-moment buying; studies show it happens on 3 out of every 5 shopping trips. The thinking, behaviors, and circumstances surrounding these (some say irrational) purchases are rooted in psychology and driven by emotion.
 
In aggregate, capturing revenue from impulse purchases becomes significantly important for some sectors. For many retailers and brands, their marketers labor over getting the right product in the right place at the right time. It has become part science and part art form – and been continuously refined over decades. The front check-out area of grocery, drug, convenience stores show how tempting guilty pleasures and new discoveries to shoppers’ baskets is a big deal. Discretionary packaged goods, beverage, and snack & confectionery companies now rely on these last-minute purchases for upwards of 15% of their revenue. But there is risk of losing these sales opportunities from the growing number of online purchases, which tend to be more pre-planned. 

​How can e-commerce marketers drive impulse purchases in an online setting; what tools and techniques can they use? I recently worked on a consulting project with a CPG company that examined this very question. We studied how to crack the code on what drives impulse buying online, and which marketing and merchandising tactics can evoke those buying behaviors. What key success factors, tools and techniques can best facilitate this outcome? How can we measure the success? Below I highlight 4 approaches to enhancing impulse buying in E-commerce:
 

1. Understand the Mindset

Understand what is driving your customer’s impulse buying in general, and how is it affected by a digital environment. This involves understanding who is doing the shopping, when, why, and their mindset and emotional circumstances surrounding the shopping trip. For example, a shopper who – at the end of a long work day – might be tired and in a vulnerable emotional state where “treating themselves to a snack” might be a deserving add the grocery list. Perhaps the ambitious, aspiring shopper is making a long-desired purchase, and celebrates the moment by giving a fun “gimmick” item a try. Study the shopping behaviors of your customer base, and understand how different items get into their basket - both planned and unplanned.
 

1. Merchandising, Messaging, and Motivation

While retail environments have limited merchandising opportunities to position upsells and impulse buys (i.e. the checkout line), online stores actually have several ways to dynamically put buying ideas and suggestions in front of shoppers – along with specific messaging, offers, and pricing. Examples include cart upsells, real-time offers on product pages, suggestions based on cart contents or bundle ideas based on other purchases. Another way is suggesting add-on items to hit the free shipping threshold. The capability to dynamically present and promote just the right product to match up with a shopper’s profile and particular shopping basket – is actually an advantageous marketing opportunity vs a brick-and-mortar environment, where a limited number of items can be presented at any one time.
 

1. Test, Learn, Repeat

This is where the ability to measure nearly every aspect of a digital shopping journey is really helpful, and having an organized and disciplined testing and data gathering methodology is highly important. E-commerce strategists can drastically speed up and replicate the trial-and-error nature of finding out which tactics work. We can look at the types of products added to the cart before checkout (and in which order), and study attach rates for items added during the checkout process. This can be especially effective with the help of machine learning, which can rapidly run multi-variate tests and optimize product offers in real time. One-to-one marketing strategies, which are heavily dependent on customer data, could also help identify a shopper’s propensity for impulse buys. These approaches can be very effective and allow for some creative and innovative marketing ideas.
 

1. Facilitate Immediate Gratification with Quick and Seamless Order Fulfillment

Or as close to it as possible. Impulse buys are all about the desire for instant gratification, so the delay in getting them into the customer’s hands presents an inherent challenge for e-commerce channels vs. traditional retail. However, the rapid evolution of new logistics and delivery options are helping e-commerce sellers drastically reduce the potential fulfillment and delivery time. Same-day delivery is a growing feature – being led by none other than Amazon. Also, many retailers now feature “buy online, pick-up in store” (BOPIS) as a way for shoppers to quickly get their merchandise. Curbside pickup for groceries is a form of BOPIS that actually creates an opportunity to suggest adding impulse items to a customer’s basket. Geo-fencing technology can play a role in this as well – with mobile push notifications suggesting last-minute impulse items just as the shopper is approaching the store pick-up area. Lockers and drone deliveries are other examples of emerging ways to provide that rapid gratification for shoppers.
 
It’s essential for E-commerce retailers and brands – and their marketing teams – to be actively thinking about how to drive impulse buying online, as it represents a material source of revenue. The many factors surrounding the instance of an impulse buy (shopper psychology, product merchandising & placement, offer management, and speed of gratification) create complex challenges in an e-commerce environment. Developing ideas, strategies, and tactics around these topics I’ve described above will help us better understand how to preserve these valuable opportunities as shopping continues to migrate online.
 
Thoughts, feedback, or ideas? Please share in the comment section below.

As customer centric digital marketing has improved with the help of new marketing technologies over the past few years, an important trend taking place in e-commerce is the way that effective digital marketers create a self-sustaining ecosystem in which consumers can thrive. This approach, often oversimplified under the umbrella term “social media marketing,” underscores the evolution of the customer journey online, and the close relationships between consumers, their like-minded peers, and the companies they do business with. I am referring to the ongoing convergence of the “three C’s:” robust consumer-oriented content, the communities that form around this content (and interests), and the commerce that comes out of these content-enabled communities. When these three C’s are well executed and in sync, the resulting business performance and value creation is greater than the sum of the parts – i.e. a “flywheel effect” is created.

Content – Compelling and relevant content is where it all starts, and what creates stickiness between brands and their customers; it’s the glue that facilitates modern customer engagement. Great content is the key to drawing in consumers and holding their attention on a subject that interests them. Content is often assumed to be social media posts, but can also come in the form of articles, blogs, infographics, podcasts, videos, e-magazines, and other multimedia experiences. Content allows marketers to inform about products and services, and the problems that they solve, but does it in a way that follows a narrative; it tells a story. The content serves to educate while enticing, in a way that is easy to consume and leaves the consumer wanting more.

Community - Around relevant and well-produced content, a community can then naturally form. This is key, even though building and nurturing communities is often a step that is overlooked when creating an online ecosystem. Fostering a community of like-minded, engaged people not only drives return traffic, but also promotes discussion and advice sharing, sparks new ideas, and creates a supportive environment of camaraderie. With an engaged community, the brand engagement is not just occurring between buyer and seller, but amongst all constituencies in the value chain. This is the scenario where marketing programs can really build its own momentum and scale – bolstering the flywheel effect.  Most importantly, customers keep coming back to contribute user-generated content which helps build an ever-growing library of material, in turn helping with SEO. With this level of engagement, interest, and trust, the next natural step for the community is to consider buying appropriate goods and services aligning their interests. The buying experience just needs to be easy and consistent with the brand experience they have enjoyed thus far.

Commerce - The “store.” This is where it all comes together – where the community of customers with like-minded interests – having been informed and educated by the content provided on the site - happily and proudly make their purchases. Here efforts and resources that went into producing great content and nurturing a cohesive community are ultimately monetized. But beyond this, the commerce piece effectively completes and renews the cycle of engagement between brand and community members. Purchasers discuss their customer journey with the community, and provide reviews on their purchases – essentially becoming brand evangelists (if all goes well) and adding to the flywheel effect. Obviously, a great commerce layer requires intuitive UX, strong data security, and product merchandising that anticipates customer needs & concerns. Well-developed mar-tech helps make this happen more easily - putting the right product in front of the community at the right time – all while capturing essential data to improve and optimize the overall “ecosystem.” Also, the buying experience has to link back to the content and shared interests of the community. If executed well, this is the holy grail of brand-focused customer engagement. ​

​Effectively executing the “three C’s” of good personalized marketing can be a huge competitive advantage, as it can lower customer acquisition costs and improve long term retention – all of which increases customer lifetime value. It also can fuel rapid growth, as evidenced by the success of companies utilizing this marketing model: Houzz, Motoroso, Purch, and F+W Media. Placing the customer at the center of your e-commerce marketing strategy seems intuitive, but a good deal of thought needs to go into making it self-sustainable and work at scale – thus creating the flywheel effect.

A few weeks ago, I attended the Silicon Beach Fest conference for tech businesses and start-ups here in the L.A. area. This conference, held over the three days at the Marina Del Rey Hotel, is produced by DigitalLA, and is now in its 15th year. This year I found informative content panels with interesting and knowledgeable people, discussing relevant topics and emerging trends. While not the largest conference around, it was a great way to assess the health of the Silicon beach start-up community, and understand the key developments and gain insights on the business climate here.

I came away from the conference with 4 key observations about what LA start-ups are experiencing:

1. L.A. startups are growing up and maturing – Based on the panel topics, comments and questions among panelists, and from my conversations with attendees, it is readily apparent that the key focus for many Silicon Beach startups are shifting. Whereas in previous years, when the focus was on engineering & design, product development, and go-to-market strategies, this year seemed different. Entrepreneurs were turning their attention to marketing, revenue & profit growth, and retaining talent - a great sign that businesses are gaining traction and maturing. This, in turn, helps the broader tech & startup ecosystem to solidify and grow.

 

1. Venture capital is expanding but still under-represented in LA – Although the venture funding environment is healthy right now, with over 200 funded deals totaling over $3B in 2015, access to venture capital for LA start-up still more than likely requires the founders and management to take a plane ride. This is especially true for later stage investment rounds, when many investors are coming from the Bay Area, New York and elsewhere. There are no doubt some strong LA-based VC firms that are supportive and well-known in the community (Upfront, Greycroft, Mucker, Crosscut, etc), but many other established firms are still reluctant to set up offices in SoCal. Angel investors and firms focused on early funding continue to be most prevalent. Experts at the conference don’t see this dynamic changing anytime soon.  
   
   
2. Drones, VR, and social influencers were hot topics of discussion – There was an entire VR lounge on display; The Huffington Post covered the conferences “future of VR” track; Prominent experts in drone technology predicted “Billions of Flights from Millions of drones” within 5 years’ time. The advances in drone technology as a business – as well as new FAA regulations - is of special interest to the L.A. tech community, given its roots in aerospace & defense (JPL, Lockheed, McDonnell Douglas, etc.).  Similarly, virtual reality sits at the intersection of technology, media and entertainment so it makes sense that I would be actively pursued by a number of SBF participants. And of course, LA’s fixation on beauty and celebrity means that the rise of social media and influencers’ impact on marketing in some industries – social commerce and related marketing models – was of keen interest.

 

1. Silicon Beach continues to build momentum. LA entrepreneurs and their companies continue to gain experience, garner attention, attract capital, and see positive results. High-profile companies - and successful exits – include Snap, Inc., Oculus, Maker Studios, Dollar Shave Club, and The Honest Company, with several others on the horizon. This brings more credibility to the community and confidence to its participants – that was certainly reflected at this year’s Silicon Beach Fest. LA continues to have a great setup for fostering start-ups: strong research universities, a diverse pool of business talent (attracted to a nice setting), support from the city, and an industrial heritage in entertainment, media, consumer businesses, and aerospace. The pieces continue to fall into place to make “Silicon Beach” (a moniker disliked by many here) a key ecosystem for new business creation, innovation, and economic growth. At last count, there were 1,113 start-ups on the startup map of the LA area, triple the number observed on the map just 4 years ago.

I look forward to continuing to observe (and contribute to) the advancement of the L.A. tech scene. Hopefully the success of L.A.’s start-ups – and its business conferences like Silicon Beach Fest - will generate even more confidence, and bring a larger spotlight on our market. This will, in-turn, attract talent, capital, and more entrepreneurial ideas that can be developed here and enjoyed around the world.

Thoughts about this blog post, or any others I’ve written? Leave a comment here or go to my LinkedIn Profile to share your feedback.

I am one of those people who actually reads the alumni magazine from their alma mater schools. I think you can often find interesting nuggets of learning in there. One such publication I recently read - Georgetown Business, from Georgetown University’s McDonough School of Business (where I earned my BBA), featured an article that compelled me to think more deeply about one area of my business expertise – e-commerce marketing – and how it could influence my future practices to maximize my business results.

The “Favor Request Effect”
This article, entitled “Favor Pitch – Georgetown McDonough Researchers Uncover a Surprising Negotiation Tactic,” reviewed a research project led by Georgetown University Marketing Professors Kurt Carlson and Simon Blanchard (along with Penn State University PhD Candidate & teaching assistant Jamie Hyodo); the title of the study, published in the Journal of Consumer Research is The Favor Request Effect: Requesting a Favor from Consumers to Seal the Deal. It describes a way for sellers of certain products to improve the outcome of negotiations with buyers. Their study revealed what they refer to as the “Favor Request Effect” – that under certain conditions sellers can achieve better negotiated results when they accompany a (modest) price concession with a request for a favor from the buyer.

According to Professor Carlson, with whom I spoke for this piece, the study focused in on negotiated transaction scenarios that met certain conditions needed for the effect to work. Such conditions being that the offer and request being made dynamically (or at least appearing so to the buyer), and the buyer and seller communicating one-to-one. If a discount offer and favor request is communicated to everyone, the effect will be diminished. Also, the favor requested has to be appropriate to the situation and not overly onerous; examples can include asking for a recommendation or endorsement, a customer referral, or providing certain customer information.
The article states that “The Favor Request Effect is found across multiple shopping contexts and multiple types of favor requests…”1. However, the study was conducted only in the US, and did not explicitly look at other countries or alternative sales channels such as telesales or e-commerce. (They are working on a new study, however, to see if the same principal applies if the seller refers the buyer to a competitor for a complimentary product).

The study’s (seemingly counter-intuitive) conclusions have received a fair amount of attention – even being covered by the Huffington Post - as it could have a meaningful impact on sales negotiation tactics going forward. 

See the article from Georgetown Business here: Favor Pitch – Georgetown McDonough Researchers Uncover a Surprising Negotiation Tactic 

See a Georgetown University press release regarding the study here:  http://msb.georgetown.edu/newsroom/news/favor-request-effect-requesting-favor-consumers-seal-deal 

Why Does it Work? What Are The Implications?
According to the article (and my conversation with Professor Carlson), the Favor Request Effect hinges on the premise that the asking of a favor drives a normally adversarial relationship between buyer and seller towards alignment by virtue of the requested reciprocity. A sales negotiation is typically a situation where buyers are trying to get the best price & value, but asymmetric information (around pricing, costs, and market factors) gives sellers an (at least perceived) advantage.

Professor Carlson explained that the seller offering a moderate discount, along with requesting a favor, sends a strong signal of value credibility - that the sellers bottom line price has been reached. This signal neutralizes the perceived seller advantage, creating buyer-seller alignment that a “win-win” has been achieved, and a deal can be done.

In other words, Carlson says “it’s an alternative to haggling – when the discussion is somewhat adversarial and each party seeks to only maximize benefit for themselves. The favor request effectively aligns the buyer’s and seller’s interest and creates an environment of reciprocity.” The study’s write-up also describes the effect of the seller’s signaling that the advantage has been neutralized:

“While a consumer may, by default, perceive a seller’s willingness to negotiate on price as a self-interested activity, adding the request for a favor should alter the consumer’s perception of this activity, causing the buyer to see it more as the first step in a reciprocal interaction.”2 

No doubt these observations must provide an encouraging new tactic for salespeople – who can now increase sales close rates and achieve better sales results, all while getting customers to do favors that will benefit the overall business. Seems like a “win-win,” and testing it would be a no-brainer.

The Favor Request Effect and E-commerce
However, it did beg a question: what if we were to apply this approach to an e-commerce context? If the right circumstances are presented to an online consumer, would the same effects occur – i.e. would it increase e-commerce conversion? Can a sense of reciprocity and alignment be created within online merchandising pages, in the cart, or in the check-out funnel? How closely would one need to simulate the conditions of the dynamic person-to-person negotiation?

In answering this, a good place to start would be an examination of what (if any) e-commerce techniques or scenarios are currently in use that simulate the favor request. Do these tactics in an online e-commerce situation improve conversion rates and product sales – by as much as 50% as the study found for live negotiations? If so, the implications for e-commerce marketing and merchandising could be huge.

Below I provide some examples of e-commerce tactics similar to a “favor request” in place today that may shed some light on the dynamic. Let’s examine…

Abandoned Cart Offer Coupled With Request For Social Referrals:
Getting customers to return to abandon online shopping carts and complete their orders is a nagging problem for e-commerce marketers, and seems like it would be conducive to the Favor Request Effect. The conditions seem appropriate: discounts or other incentives can be offered to the buyer on a one-on-one basis (albeit online). Such an incentive, coupled with a favor request, could possibly improve abandon cart conversions. In fact, there is currently an app on the Shopify e-commerce platform - Checkout boost by Beeketer – that seems to put this tactic into play. The Checkout Boost description says that it offers a discount to abandoned carts, coupled with a request for a social referral, to get consumers to complete their cart checkouts. According to the app’s reviews, abandoned cart conversion can increase as much as 50%, coupled with a noticeable increase in social traffic. This is a positive indicator that simulating the favor request can help close more online sales with hesitant customers.

Social Referrals, Social Sharing, and Social Proof:
Social referrals are fairly commonplace, and it has been demonstrated that they have a positive effect on e-commerce sales traction. This marketing and merchandising tactic is fairly well-known by e-commerce professionals, and in use on a number of landing pages and product pages of e-business sites. A favor request of a social referral would offer some of the strongest benefit that can help boost conversion on the immediate sale, as well as others down the line.

Similarly, social proof and social sharing (broadcasting a specific purchase or support of a site on social media) legitimizes the transaction and site in other’s eyes and is considered one of the “six pillars of persuasive marketing.” Requesting social proof has effectively improved conversion rates in studies (see link). Asking customers for social proof is common and not a big imposition, so it’s even possible to ask this favor for everyday low prices, while also reaping the other marketing benefits of social proof.

Requesting a Product Review:
Asking customers to write reviews is straightforward and common practice (as it was in the buyer-seller live negotiations). It’s well known that more customer reviews lend credibility to e-commerce sites and their product.  Reviews are a key determinant in search results on Amazon and Google, for example. Asking customers to write reviews makes sense, and gives customer a familiar and easy way to reciprocate for the discount. It may also prove to be quite an effective conversion boost.

Requesting a Site Registration Or E-mail Newsletter Sign-up:
It’s now commonplace for E-commerce sites to offer customers incentives for becoming “registered” customers or signing up for marketing e-mails. These incentives usually comprise of discounts on future purchases, gift cards, or other “preferred customer” perks. But what if the tactic were reversed and tried the other way? What if a small discount on the current purchase was provided to shoppers, in exchange for signing up to an e-mail newsletter? Would this increase conversion for the immediate transaction (due to the favor request effect), while also boosting e-mail address capture? Worth testing, it seems.

Asking to Accept Slower/Downgraded Shipping:
Asking a “favor” of accepting slower shipping (at the same price – or free) may be a lot to ask consumers, but it could be worth trying. Amazon has tried a form of this idea, with its “no rush” shipping program for Prime members. They have offered larger discounts on books, as well as a $1 discount on instant video service. However, I could not find any indication if this increased the conversion rate of these items. It could be worth testing, when tried in conjunction with a free shipping offer.

Has this ever been A/B tested? It should be…  It’s a low (or no) cost way to increase conversion and revenue, while also deepening customer engagement and potentially generating loyalty. 

Final Thoughts: Implications for E-commerce Marketers
Professors Carlson, Blanchard, and Hyodo’s study on the “Favor Request Effect” indicate that sellers asking for a favor from buyers in live negotiations can result in greater sales success. Even though the study didn’t explore whether the effect can work to positively impact e-commerce sales, it seems to me that the general principal can be applied to e-commerce carts, checkout processes, and merchandising. The examples of in-use favor request tactics I provided above indicate solid evidence that these principals are being successfully applied in e-commerce today, with encouraging results. I believe further testing and optimization of some of these ideas would be a worthwhile endeavor. I for one will vigorously test the favor request to boost conversion and accelerate revenue growth in the e-commerce businesses for which I consult and manage.

Thoughts, comments or questions? Feel free to reach out to me directly here at www.lukegrant.net.

1: Simon Blanchard, Kurt Carlson, Jamie Hyodo: “The Favor Request Effect: Requesting a Favor from Consumers to Seal the Deal” Journal of Consumer Research – Oxford University Press,
2: Bob Woods: “Favor Pitch – Georgetown McDonough Researchers uncover a surprising negotiation tactic,” Georgetown Business, Georgetown University Press, May 2016

There are lots of ways to shop nowadays. In addition to just going to a store and making a purchase, there is e-commerce, mobile commerce, social commerce – all in an effort to conveniently place brands, retailers and direct marketers where consumers conduct their digital lives. Now, there is yet another newly emerging commerce model gaining traction – called “Conversational Commerce.” If the term conversational commerce is new to you, it was coined in early 2015 by Uber lead engineer Chris Messina, but it’s being talked about as a way to more effectively serve busy shoppers and deepen relationships between customers and brands.

Conversational commerce is an offshoot model that combines the best aspects of the three fastest growing digital trends right now: e-commerce, mobile transactions, and messaging apps. Specifically, it is the practice of brands or vendors initiating, completing, and servicing business transactions over messaging applications, such as Facebook Messenger, WhatsApp, WeChat, or Slack. It’s “conversational” because the experience is carried out as a conversation – either with a live agent or through an automated but intelligent "bot" -  kind of the way a natural conversation would happen in a retail store environment – except this is done in the digital realm without ever leaving the messaging app being used.

Here are 4 key things that I thought make conversational commerce an exciting trend to follow:

1.)  The convenience factor – Always-on threads allow for customers to pick up on conversations where they left off, potentially eliminating the need to re-explain your wants, needs, and problems. Combine this with the fact that messaging apps are about 75% penetrated with internet users globally (messaging apps recently surpassed social media networks in terms of daily active users), and the convenience of shopping right from your messaging app is hugely appealing. No more clogging your phone interface with dozens of distinct apps for each vendor/brand you connect with.

2.)  Intuitive navigation through the purchase funnel – you can ask questions and get the information you need as you shop, personalizing the shopping experience on a one-to-one basis. Also, today’s conversational commerce platforms can accept payments and complete orders, which is a game changer. And it avoids the dreaded call into a phone queue (which is a foreign concept to millennials anyway). This is where the interaction with humans and bots comes into play. Much is being written about the developing capabilities of bots powered by artificial intelligence; it will be a lynch pin for ensuring a positive customer experience as scale.

3.)  The collection of precise shopper behavior data – millions of customer exchanges captured, combined with the capabilities of big data to gain insights on shopper behavior and preferences, means the level of consumer knowledge and insight will be unprecedented. Analyzing consumer trends and shopping behavioral patterns will allow for smarter product planning, better pricing, and more effective execution of the shopping experience. For businesses this will drive higher conversion rates, better retention, and lower customer acquisition costs. For consumers, it will lead to making purchases faster, better, and cheaper. A win-win for all sides.

4.)  Integration potential with the Internet of Things – The potential here is very exciting. Combining conversational commerce with IoT devices opens up possibilities to serve customers in new scenarios and create incredible linkages between customers and brands. Think of a smart home AC system connected to a Nest Thermostat, telling you when it’s time to change the filters in your house. Don’t know what type to buy or where to get them? Simply send a message through the interface and the proper filter is ordered and on its way at the best possible price.  The popularity of Amazon’s Echo device is partially due to the exciting possibilities here – you can order any number of products from your Amazon profile simply by voicing commands to Echo. Digital commerce that is “conversational” in the truest sense of the word.

In a way, it seems like what is old is new again – the notion of having a conversation (i.e. personal interaction) in the process of making a purchase or using a service. Indeed, the concept is not entirely new – there have been online chat features on e-commerce websites for years, and businesses have been using text messages and push notifications increasingly in the recent past (not to mention telesales transactions). But the fact that the process is being consolidated within widely used messaging apps, combined with the use of more effective automated bots, opens up huge possibilities for this newest model of commerce - by applying technology to make shopping more seamless & intuitive.

Have a question or want to add a thought? Please leave a comment below or contact me through the site's contact form.

The numbers that indicate its success are pretty staggering: $270 billion in gross merchandise value from 13 billion annual orders, over 280 million registered users, 100 million visitors – per day, and a revenue growth rate of about 45% year-over-year. But many in the US – especially those that don’t follow e-commerce or stocks – are unaware of any of this. They do not know of the name Alibaba at all. To clarify, Alibaba is a China-based e-commerce company that (among other things) connects buyers and sellers of millions of products. Than how can it be that this company is so little known by the American consumer?

There are multiple reasons: the company has not targeted the US market (yet), it has done no advertising, and no significant PR in our media (other than in recent days surrounding its IPO), and most importantly, it’s English language website has not been widely discovered – yet. But Alibaba is too big to ignore – the splash that the IPO created is clear proof of that (up some 32% on its first day of trading) showed that we in the USA need to understand that the center of the online universe is not necessarily always going to be Amazon, Ebay, Google, Facebook, and Youtube. The size of China’s market will eventually dwarf ours, and its top players will certainly be bringing their size, resources, pricing power and creative ideas to our shores in the not-too-distant future.  

So in the spirit of learning more about Alibaba and its charismatic founder Jack Ma, and sharing about the firm’s massive growth and success, I have read a number of articles, etc. on Alibaba’s rise to dominance (see links below). I have culled 5 key reasons why it has become such a powerful player in today’s e-commerce world.

Top 5 reasons for Alibaba’s Wild success:
1.  A focus on solving problems for B2B customers - When Jack Ma started Alibaba, he was fascinated by the scope and power of the internet. Yet he also recognized it as a way to address one of China’s big problems: struggling small business growth amidst a poor commerce infrastructure. Ma made e-commerce a core solution for Chinese small businesses to find markets and flourish. Ma himself said in comparing e-commerce in the US and China: “In US, e-commerce is a dessert. In China, it's a main course."

2.  An early mover in a huge addressable market – It’s no secret that China is the largest e-commerce market in the world (in one of the largest economies in the world), and Alibaba has done a good job of jumping out in front of the competition to gain significant share. However, experts agree that there is still lots of room for growth, and with new competitors now entering the market, Alibaba knows that it must continue to improve its offerings and its technical platform to maintain its lead.

3.  Building an online ecosystem – Alibaba does a huge amount of e-commerce, but it does not stop there. It understands that you need to create a platform with multiple services, experiences, and models in order to create a “sticky” customer. So the company also has successfully launched payment systems (Alipay), financial services, Yu’e Bao, and consumer focused discount shopping sites Taobao and Tmall. This allows the company to deepen its customer relationships and diversify its growth channels.

4.  A visionary leader who surrounded himself with a strong team – As is mentioned above, Jack Ma had a strong vision that the internet would work well in China, and there is no doubt that he has executed on that vision. But he was also smart enough to know that he couldn’t do it alone. He have built a strong team of leaders, partners and investors that include Joe Tsai (in charge of finance & legal), Jonathan Lu (in charge of operations and marketing), Jerry Yang (Yahoo founder and BABA board member), and Japan’s Softbank (an early investor and supporter)

5.  A penchant for keeping humble priorities – In an interview for “60 Minutes,” Jack Ma turned an American business maxim on its head when he laid out his strategic priorities: “customer first, employees second, and shareholders third.” He raised some eyebrows with that statement, but pointed out that if the first two are accomplished, then the third priority will take care of itself. Interesting perspective from a man now with stake in his company worth $25 billion.

Alibaba will be a fascinating company to follow in the coming months & years. As China’s e-commerce market continues to grow, how will increasing competition from both Chinese start-ups as well as US giants (Amazon, Ebay and Google all are making a play for the China market) impact Alibaba’s market power and strategy? How will the Chinese government (who has created a friendly environment for Alibaba to succeed in China) play a role into the future? What does Jack Ma have up his sleeve next (many expect several acquisitions with the newly raised capital). I will be watching this giant that has now come onto our shores – and so should you.

You can read some of the articles that I found on this topic at the below links:

Wired article on Jack Ma

Bloomberg Article on Alibaba's success seen through Foxconn founder's eyes

Stanford University Article on Alibaba success factors

DW Article

DMR Piece on Impressive Alibaba Stats

See WSJ video on Alibaba and Chinese e-commerce landscape 

Thanks, and please feel free to comment.

Google’s strategy to slowly but steadily monetize its now indispensible peripheral web properties is paying off well for the company (as evidenced by their consistent 20% YoY growth in revenue, and over $50 billion in cash on hand). It is also creating a bit of havoc with needed help for online marketers, specifically search marketing, primarily due to their recent conversion of Google Shopping (which was free for merchants) to Product Listing Ads (PLAs) starting last August, which is a new version of the platform that is no longer free and is subject to an auction based cost-per-click paid model. As PLA’s are forcibly adopted by more and more e-commerce merchants, it is not only draining digital marketing budgets and requiring additional SEM resources, but it is also causing a big shift in the way a Google search results page is laid out and presented. Supposedly Google is doing this for shopper convenience and clarity, as search marketer Eric Barney described:

“PLAs represent Google’s effort to reduce the clutter in the Shopping experience. By charging for clicks, companies need to have a strategy surrounding product submission, feed optimization, and bid management. There’s no point in getting hung up on the cost of PLAs. It is what it is. We should be grateful we got all those free clicks for so many years,” says Barney. (source: SearchEngineLand.com)

The amount of “real estate” now taken up by Google Adwords listings and now the expanded PLA layout has pushed most of the organic search results beyond the first 2 or 3  below the fold, and any result below #8 is now pushed to page 2. This not only raises the stakes for a paid result to now have to stand out more forcefully from its additional competition, it puts even greater pressure on the SEO work that is incorporated into the site content, meta-data, url structure and the back-links associated with trying to draw traffic.

And that’s not to say that the paid PLA algorithm doesn’t have its flaws. Google seemingly has put more emphasis on product relevance to keywords (a good thing), but in executing some exact match keywords, there can still be some incorrect  and confusing listings provided. Also often the photos and the merchandising is still not perfected – the shopper may still need to pour over many confusingly similar listings before finding exactly what they were looking for.

On the other hand, the fact that the old Google Shopping – one of the great free sources of traffic – is now charging on a CPC basis, this will drive many merchants who can’t afford the marginal cost out of the market (it can add up to 50% to a search budget), and the remaining players will find less competition for their ads. This approach, plus some eventual improvements in product images, will have impact on the overall success of the program, and it should set up a new marketing battleground in the PPC channel.